The Interaction of Solvency with Liquidity and its Association with Bankruptcy Emergence

31 Pages Posted: 26 Jan 2003

See all articles by Daniel M. Bryan

Daniel M. Bryan

State University of New York (SUNY) - Accounting & Law

Samuel L. Tiras

Indiana University - Kelley School of Business

Clark M. Wheatley

Florida International University

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Abstract

Prior research has shown that accounting information available prior to a bankruptcy is associated with the likelihood of bankruptcy. We show that additionally, the accounting information available prior to bankruptcy is associated with whether or not a firm will emerge from bankruptcy. We predict that firms that exhibit low solvency risk and high liquidity risk are most likely to emerge from bankruptcy. Firms that exhibit high solvency risk and high liquidity risk are predicted to be least likely to emerge from bankruptcy. Cross-sectionally, our results support these predictions, but our findings differ across large and small firms.

JEL Classification: M41, G33

Suggested Citation

Bryan, Daniel M. and Tiras, Samuel L. and Wheatley, Clark M., The Interaction of Solvency with Liquidity and its Association with Bankruptcy Emergence. Available at SSRN: https://ssrn.com/abstract=333915

Daniel M. Bryan (Contact Author)

State University of New York (SUNY) - Accounting & Law ( email )

Buffalo, NY 14260
United States

Samuel L. Tiras

Indiana University - Kelley School of Business ( email )

801 W. Michigan Street
Indianapolis, IN 46202
United States
(317) 274-3420 (Phone)

Clark M. Wheatley

Florida International University ( email )

11200 SW 8th Street
MANGO 337
Miami, FL 33199
United States
305-348-4209 (Phone)

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